Plenty of horror stories are being bandied around at present that leave an air of uncertainty looming. The complaints are not just that the stock market is unpredictable and that car buyers may be refraining from purchasing a new or used car due to a lack of funds. Or indeed that the current situation with more possible terrorist attacks and the bombing campaign are resulting in concerns for the near future among consumers.
The industry is also awash with doom and gloom as some people talk the market down. They are not only depressing themselves but others around them with the inevitable self-fulfilling prophecy.
The reality is that the current slowdown in the market was expected, as it is merely a seasonal adjustment. It is anticipated to last for a few months.
The present crisis in the airline industry, with operators laying off staff due to the collapse in customer demand, will have a knock-on effect in the used car market.
A reduction in air travel means that fewer rental vehicles are required at the airport. This downturn has hit several manufacturers, with reports suggesting that some fleet companies have only registered half the expected number of new cars in September. This could leave the industry in short supply of six-month-old cars in March.
However, the fear is that manufacturers are still expected to produce the same number of cars, creating a problem when it comes to disposing of them, possibly via the dealer network.
In addition, ex-rental cars being defleeted are now under immense pressure. Values appear to be sliding daily as volumes increase in a difficult market.
The fleet market is absorbing the seasonal pressures, but again at the expense of the high mileage and average condition cars. Now is the time to make sure all vehicles are conditioned and valued to their correct category.
The trade tends to be leaving the average and below average cars alone in favour of buying Cap Clean. This is because of the uncertainty within the market.
Dealers do not want to stock cars that are in need of work, with a view to the expected month-end book drop reflecting market movements. They are sticking to those which will have the maximum time on the retail forecourt in which to sell the vehicle.
The auction houses are reporting a tough market, with dealer attendance sliding and conversion rates falling into the region of 60% and sometimes lower. Specification and colour appear to be the most important factors at present – cars with the right combination and in Cap Clean condition will make strong money.
The run of the mill fleet cars such as Mondeo and Vectra are often passed over in favour of something smaller, such as Focus, 206 and Golf.